You are borrowing money that must paid back after 6 months. You are given the following loan options:
(a) 12% per year
(b) 11% per year, compounded daily
(c) 1% per month
(d) 11.5% per year, compounded monthly
Determine the effective semi-annual interest rate. Which loan option do you prefer?
You decide its time to start saving for your retirement by making equal bi-weekly deposits into an account that earns 8% year, compounded daily. How long will it take for you to have 100 times the amount of the initial deposit in your account?
The Autocar E3 refuse truck has an energy recovery system that is expected to reduce fuel consumption by 30%. The fuel cost for a regular refuse truck (without the energy recovery system) is $500 per month. How much can a private waste-hauling company afford to spend now on the recovery system, if it wants to recover its investment in 5 years plus a return of 12% per year, compounded quarterly.
(a) Assume no inter-period interest
(b) Repeat with inter-period interest collected
A company is planning a plant expansion that is expected to cost $10 million. How much must the company set aside now in a lumps-sum investment to have the money in 2 years? Capital funds earn interest at a rate of 12% per year, compounded continuously.